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The luxury car industry in India has been quite affected by the new rules set by the The Goods & Services Tax (GST) council. The council has fixed an additional cess of 15 percent over the peak GST rate of 28 percent on luxury cars, according to reports.
But when asked to elaborate, Finance Minister Arun Jaitely said that the cess had been decided bearing in mind changed and developments in the future. The exact excess cess will be decided once GST rates are finalised and it is likely that it will be much lower. To make his point clearer, the minister gave an example of a car that was taxed at 40%. Under the new guidelines, a GST of 28 percent plus 12 percent cess would be levied to keep the cess rate the same. The money collected from this extra tax will be used to cover losses faced by the state. Mineral water and aerated drinks will also be similarly taxed.
This might not mean an immediate increase of prices in the auto industry but it will affect production cost on a wider scale in the future.